Detroit retirees ask Obama for pension help

By Matthew Heimer

In today’s political climate, the odds of Washington approving another Detroit bailout seem about as good as those of Carlos Danger winning New York’s mayoralty as a write-in, but public-sector unions are giving it their best shot. The AFL-CIO, whose member unions represent some of Detroit’s 21,000 retired city employees, issued a statement Thursday urging President Obama and Congress to approve federal aid that would keep retirees from facing pension cuts as part of Detroit’s Chapter 9 bankruptcy proceedings.

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Coming soon: An ugly pension battle.

The White House hadn’t responded yet to the AFL-CIO statement as of Friday afternoon, but the Obama administration is seen as unlikely to try to act on Detroit’s behalf; Republican senators, meanwhile, have introduced legislative amendments this week explicitly barring Congress from directing special aid to Detroit or any other financially troubled city, as Megan R. Wilson notes today in the political newspaper The Hill.

The unions are also arguing that Kevyn Orr, the city’s emergency manager, and other advocates of bankruptcy are overstating how badly underfunded the city pensions are. Orr has estimated that the pension funds’ assets fall about $3.5 billion short of their obligations; union officials say the figure closer to $1 billion. In a statement earlier this year, the city’s Police and Fire Retirement System argued that its own pension was 96.1% funded, which would make it one of the country’s most financially sound funds; the union also ridiculed Orr for basing his figures on a report from an outside pension consultant that referred to its own assumptions as “very rough preliminary guesstimates.”

“Very rough” may turn out to be an understatement: The pension battle seems likely to play out, and remain ugly, for a long time. The next hearing in front of Rhodes is scheduled for Aug. 2; in the meantime, The Wall Street Journal’s Emily Glazer and Katy Stech, meanwhile, have compiled a Detroit Bankruptcy FAQ for your weekend reading enjoyment.

About Encore

Encore looks at the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities, needs and priorities of people saving for and living in retirement. Our lead blogger is editor Matthew Heimer, and frequent contributors include editor Amy Hoak, writer Catey Hill, and MarketWatch columnists Elizabeth O’Brien, Robert Powell and Andrea Coombes. Encore also features regular commentary from The Wall Street Journal retirement columnists Glenn Ruffenach and Anne Tergesen and the Director of the Center for Retirement Research at Boston College, Alicia H. Munnell.